Boards with Purpose - Jenni Hutchins

00:00:04:16 - 00:00:31:02

Phil

Welcome back to boards with purpose. Today we're chatting about remuneration in the not for profit sector. And I'm joined by Jenny Hutchins, CEO at Warrigal. And we're going to talk more broadly about the journey for the board being remunerated at Warrigal. But we're going to also reflect on the broader not for profit sector and the considerations around remuneration.

 

00:00:31:05 - 00:01:07:18

Phil

And I'm very mindful that the vast majority of not for profits do not remunerate their directors, and they probably never will because they're small organisations. The vast majority of not for profits are very small. In terms of revenue, so highly unlikely to remunerate their directors. But as we've seen, this continued increase in larger, not for profits doing more and more commercial kind of activities, this conversation around remuneration has just kept on growing.
 

00:01:07:20 - 00:01:35:10

Phil

In the last in NFP Governance and Performance study, there are 27% of respondents said their boards were remunerated directors. Now that is from organisations who tend to be greater than 10 or $20 million. And of course Jenny Warrigal is much bigger than that. Tell us a little bit about Warrigal and your role. First of all.

 

00:01:35:12 - 00:02:05:22

Jenni

Thanks. Feel so I'm the CEO of Warrigal. I've been at Warrigal now three years. Warrigal is an organisation that started and was started in essence by a band of brothers, of a group of volunteers who identified that there was not enough aged care and the south coast of New South Wales. That was in 1967 and they started in the show, have a local government area with ten beds.

 

00:02:05:24 - 00:02:26:29

Jenni

We now have 1648 beds of 13 homes, 12 villages and we run support at home and say HSP is a community Commonwealth support program. So roughly our revenue is around $300 million a year with the reach across two jurisdictions.

 

00:02:26:29 - 00:02:37:13

Phil

Well, what a what a growth. What a great story it is. Do you think the Band of Brothers would have ever considered that that's where Warrigal would end up? Do you?

 

00:02:37:15 - 00:03:02:22

Jenni

It's a really good question, Phil, because what I would say to you is the most important thing when you're leading an organisation is lead with two things. That is the legacy. Have your rear-view mirror on the legacy and also to have your values at your forefront. So how do you think about the legacy of the organisation but actually work with or lead with intent around your values?

 

00:03:02:24 - 00:03:36:03

Jenni

And I think our band of brothers who still, we have our, CEO predecessors and our predecessors as company members, so they voted on the remuneration of the board. I think they're proud. They're proud of what they developed, and they are proud of what Warrigal has become. And it this is part of the journey for Warrigal. I think they see that as important when we started, we had one employee and that was matron.

 

00:03:36:06 - 00:04:00:03

Jenni

Everybody else was a volunteer. Now we've got 2500 employees and 600 volunteers. So they say that liability and responsibility around governance that's brought us here, brought they brought us to this point to enable where we focus on the future.

 

00:04:00:06 - 00:04:22:00

Phil

You mentioned at the beginning there about the reasons for the establishment to provide aged care into a location where it was not available. I guess that's, at the element of the purpose of the organisation is that purpose still quite similar now, do you think.

  

00:04:22:03 - 00:04:51:00

Jenni

Warrigal is a values led, purpose based organisation? And we're really proud of that. We speak about the community a lot, and I think part of the considerations around remunerated the board was how do we not lose our focus on purpose? How do we remain ethical in a decision making and values led in our approach? And so that was really important when we started thinking about it.

 

00:04:51:05 - 00:05:26:01

Jenni

We've got about 45 company members in that company membership, people who've been with the organisation nearly as long as the organisation's age. And we're 59 years old and we've got relatives whose families started Warrigal. We have previous CEOs and previous chairs, and we have community members. So that centring on community is still part of who we are and how we think as an organisation, even though our reach is bigger.

 

00:05:26:03 - 00:05:58:11

Phil

Makes complete sense. And if you look at Australian society since that, 1960s period, we're, a much older nation now. And of course, all of the data says that we will continue to age demographically as a society so that demand, I'm assuming, is only going to increase. And as the South Coast and Illawarra increases in population, I assume you see demand increasing.

 

00:05:58:14 - 00:06:27:29

Jenni

Is demand will increase. So some of the data that we quote, so be a doubling of people over the age of 85 by 2041. Now that sounds a long time to why. But in fact it's 15 years. So how do we prepare for that? And what does that look like? Sound stewardship and leadership of this organisation in what is a critical time is very, very important.

 

00:06:28:01 - 00:07:01:14

Jenni

And when we put that rear-view mirror up and look at the history of aged care in the York in Australia, we've just gone through a royal commission. We've gone through the greatest legislation changes in the history of aged care. So a lot has been happening in this case space, and it's required dedication and commitment to be able to continue to succeed as an organisation in this space and to meet the demand that we know is growing now and it will grow in the future.

 

00:07:01:15 - 00:07:31:05

Phil

And what's going to reflect on the Royal Commission and the findings of the Royal Commission, because not everyone had done great things in the aged care space, there had been some real governance failures. So I don't want to dwell on those. But perhaps it had put a real spotlight on the quality of governance. And how do we make sure that governance is done better now and into the future?

 

00:07:31:12 - 00:07:40:24

Phil

And I'm thinking there, that's part of your journey as well as seeking what people do you need on the board, what skill sets for now and into the future?

 

00:07:40:29 - 00:08:04:12

Jenni

Yeah. Can I step back a bit? I think there in Australia there have been a number of royal commissions, both in the not-for-profit space and the for profit space. So if I pick out a few, I'll pick out the banking royal commission, I'll pick out the, institutional responses to child sexual assault and royal commission, and I'll pick out the aged care royal commission.

  

00:08:04:15 - 00:08:41:03

Jenni

All three. All three identified the importance of governance, both in for profit and not for profit organisations. All three identified the responsibilities, the liabilities, the accountabilities of board directors. So then when we step back from that, we go then what does that look like for organisations? If I come back to being a not for profit, what does that mean for us as we steward through massive changes, there were 148 outcomes or recommendations out of the Royal Commission.

 

00:08:41:05 - 00:09:12:27

Jenni

How do we guide through that? How do we enable the board to steward what is set skills matrix? I need to be able to do that. How do we make sure the board is performing to the requirements not only of the commission, but actually of the organisation? So how are they accountable to all the stakeholders, older people to whom we serve their families, the royal, the Commission, who regulates us, how did they do that?

 

00:09:12:27 - 00:10:04:03

Jenni

So how what's our social contract and how do we do that? Well, and they were part of the considerations we, considered when we were looking at, should should we remunerate a board? Can I add one thing? I don't know whether it's timely or not. Years ago, I was supposed to board remuneration for not for profit, so I but as I, worked in a previous organisation, also a not for profit, I recognise the importance of valuing and respecting the skill and time commitment that directors brought to the table and, and also the liabilities and accountabilities that they brought with that.

 

00:10:04:06 - 00:10:22:27

Jenni

And so it was a consideration as well, from a CEO perspective, about how you can work with the board and expect that they come to the table present, ready, willing and having consumed their papers.

 

00:10:23:00 - 00:10:53:05

Phil

It's been a fascinating journey because I've watched as we've done the various iterations of the study over the last decade, the NFP study. And I think when we first kicked it off, it was about 13% of respondents were referring to being remunerated now 27%. But that journey itself has been assassinating one because, as you mentioned, we're looking at the time commitment for directors, and that's only increased.

 

00:10:53:05 - 00:11:20:09

Phil

And various regulatory, changes have had that impact. We're looking at the skill sets required and it's a very diverse not for profit sector, but of I think they are about health and residential aged care or disability or community housing. The sorts of skill sets required are vastly different than perhaps we would have thought back in the 1960s.

 

00:11:20:09 - 00:11:27:08

Phil

Right. Yeah. Getting that right. Balance of directors and rims. Only one part of it. Ron.

 

00:11:27:10 - 00:12:00:29

Jenni

I often talk about remuneration being the tip of the iceberg and underneath the water there is so much so you might see that remuneration underneath there's a remuneration framework. There's a remuneration policy. There's a non-executive director position description. There's the constitution, there's a code of content conduct. There's a recruitment processes and strategy. There's performance reviews is a skills matrix.

  

00:12:01:01 - 00:12:28:15

Jenni

I could go on. There is a framework that sits under the water that informs the remuneration. And obviously you've got your governance structures, you've got your company members. If you're, if you've got that structure where a company limited by guarantee with the company members structure. And so there is so much to consider when you think about remuneration, it can't just be will remunerate board.

 

00:12:28:15 - 00:13:09:21

Jenni

It's what are the systems and processes that you've got in place to ensure that there's accountability there. And that was really important to the chair of the board that, as we considered it, that he was able to lead with all authenticity and accountability and transparency to what I said before, that legacy of the organisation. How did he bring that forward into the decision making, recognise, appreciate and respect the volunteerism that had gone on before us, but actually continue to take us into the next iteration?

 

00:13:09:23 - 00:13:12:07

Jenni

As an organisation, into the future.

 

00:13:12:13 - 00:13:48:25

Phil

Makes complete sense. As you know, I also do is in the midst of producing a remuneration guide. And I think that God will pick up on lots of that complexity of the rim discussion. But of course, for organisations who have, sitting out on this, this whole area of stakeholder engagement can be somewhat fraught. I'll use that word because there's often this unease.

 

00:13:48:27 - 00:14:12:02

Phil

Yeah. Of or feels a bit awkward that we're recommending as a board that we be paid and it almost feels. And perhaps as a society, we still feel a little uncomfortable in this concept because it had been done as volunteering for all of those years. That's challenging. Right?

 

00:14:12:04 - 00:15:00:21

Jenni

I think you spot on there. I do think it's a very emotional subject, and it's really important that emotion is recognised, because we do come out of the depths of social contracts and doing good and being of and for the community that it's not for profits. And then when we're saying, actually, we're going to pay the stewards of the organisation to do that, people worry that the attraction to then that role of stewarding and not for profit will be a different person that's attracted, which is why those elements underneath the water end up being so critical to the success of the remuneration framework.

 

00:15:00:23 - 00:15:36:14

Jenni

I think it's really important when these conversations start that we identify that people do feel conflicted talking about it, and it is an emotional topic, and that we draw out those conversations and respect and listen deeply to those, elements of discomfort. What the why and the what. And then how do you protect, the elements that people are worried about so that we can do what's in the best interests of the organisation.

 

00:15:36:19 - 00:15:40:00

Jenni

So it's a tricky path to navigate.

  

00:15:40:03 - 00:16:15:04

Phil

It is. And I also reflect back on maybe the previous century, where not for profits were often run by volunteers completely. So there wasn't the CEO role. There now is. But this whole increasing professionalism and dare I say it, society expectations has certainly driven to having high quality CEOs like yourself running these organisations. And that's just unexpected. That's a given.

 

00:16:15:07 - 00:16:28:09

Phil

And you are going to be remunerated appropriately for that. We're seeing that across the sector, and yet we still got this I think this uncomfortable part with non-executive directors.

 

00:16:28:12 - 00:16:56:14

Jenni

Yeah. I think back to how Warrigal stone started. We we had one paid employee, the matron, and then the role of the board holding committee. It was working based. Yes. It was kind of doing the repairs of the home, the often the women. It was back in the 60s and 70s would bring in the meals for the older people.

 

00:16:56:16 - 00:17:27:08

Jenni

That was the role of the committee. But now with the governance and regulatory requirements, set as an Australian standard across organisations and in particular where you are caring for vulnerable people and in this case it's older people, it is highly critical that we have the mechanisms in place to keep our constituents and the people we care for safe.

 

00:17:27:10 - 00:17:51:28

Jenni

And so there is such an accountability on the board to make sure that they and so then the right skills and the commitment is important. And valuing that commitment, I mean, I'm I'm valued as a CEO. I'm remunerated for the skills and expertise and experience that I bring to the board. Sorry that I bring to the role.

 

00:17:52:00 - 00:18:02:09

Jenni

I'm valuing the skills and expertise and experience that non-executive directors bring to the role so that they can govern and lead successfully.

 

00:18:02:12 - 00:18:02:20

Phil

Is.

 

00:18:02:26 - 00:18:29:08

Jenni

Really important. And I realise for some people that's a values shift. And working through that to help understand what's shifting and what would bring comfort to them, I think is is an important period of time to sit in and understand. So that listening piece that authenticity is, is critical in the process.

  

00:18:29:11 - 00:19:01:19

Phil

Indeed, in terms of maybe some of the nitty gritty of, remuneration of non-executive directors, my observation is the data that's out there around amounts that are paid is not great. How do you how did you go about the benchmarking? And I guess the ongoing ensuring that the amounts paid to directors are appropriate?

 

00:19:01:22 - 00:19:35:13

Jenni

Yes. So the board commissioned a paper on this, to actually understand, the processes other organisations had gone through. What the remuneration band was that was known at the time. I also reached out to a network of CEOs that I had, and I asked if they would share the information about their board and their remuneration. The chair of the board at the time was very, very clear.

 

00:19:35:13 - 00:20:01:15

Jenni

This wasn't about, remuneration for remuneration sake. It was actually about considering where we sat as a not for profit and what would be, ethical what or one do as we say. And, and to think about that in the context of what are the not for profits paid. So that's what we did. We certainly looked for benchmarking papers.

 

00:20:01:15 - 00:20:12:05

Jenni

We commissioned a paper of our own and then went out to a network of CEOs and chose to ask permission for them to share their information as well.

 

00:20:12:08 - 00:21:01:14

Phil

Makes, makes complete sense, perhaps going to reflect a little broader than, than specifically Warrigal and sync across the NFP world? One of my observations is that there might be discussions happening where not all directors are being paid, but that only one director might be paid. I've heard this a little bit more in the disability space, with the concept where someone with disability who is on the board might be remunerated often because we need that lived experience on the board.

 

00:21:01:16 - 00:21:21:06

Phil

And maybe they haven't had the same opportunities to build up financial security as some of their fellow directors. Again, a tough conversation for boards to be having about singling out just one director to be remunerated. Any observations you want to make on that one?

 

00:21:21:12 - 00:21:55:14

Jenni

I think each organisation's governance structure is and can be unique. And, I would reinforce the importance of the accountabilities and liabilities of each non-executive director to be an active participant in decision making when it came to our organisation. In the conversations that ensued, there were conversations about, with the board directors would or would not want to take the remuneration that was offered.

 

00:21:55:16 - 00:22:24:19

Jenni

And if they didn't, the options that they had for that. And so people went by and did their own, due diligence about their personal views on remuneration and how that managed that. And there are a number of options. People can, take the remuneration and then donate it, use, remuneration or donate it back to the organisation.

  

00:22:24:19 - 00:22:58:25

Jenni

But there are always considerations for tax implications as well. So I do recognise that each organisation goes through its own processes to consider what does this look like. And to your point, to understand diversity and inclusion and diversity and inclusion as a core principle for, the governance of the organisation, particularly when working with and for, people with vulnerabilities.

 

00:22:58:27 - 00:23:27:27

Phil

And I'm glad you mentioned the, the tax aspect. We won't go into detail today, but I'm really mindful that if organisations are considering going down this path, it is complex. The various arrangements with directors can be complex, like treated as employees, you know, superannuation, all of those different elements. Again, hopefully the remuneration. God, will have lots of answers in there.

 

00:23:27:27 - 00:23:59:13

Phil

But it may also have more questions that directors need to ask to make sure that they're doing things, correctly. In terms of the next steps, in maybe just in terms of succession planning for a big, complex organisation like Warrigal, what are you doing to make sure that you've got the board, not just for now, but into the future?

 

00:23:59:15 - 00:24:28:22

Jenni

So as part of the remuneration framework was also a race for strategy. It was a review of the Constitution to enable, to enable remuneration. The board, it was the policy that sat underneath that and in that policy was about the review processes around the remuneration. It was how that remuneration would be treated. It was how it would be capped.

 

00:24:28:22 - 00:24:59:03

Jenni

So what was the pool of remuneration? It was also the accountabilities around the board to perform, to to assess and review the board and to go back to the company members at the appropriate time, which in our organisation was a three year timeframe. So what we wanted to do was to ensure there were safeguards in place and that those safeguards were met.

 

00:24:59:03 - 00:25:29:08

Jenni

And we reported back to the company members in relation to how the board was undertaking their duties around the remuneration. So our steps have been to review, review the board performance, develop an action plan, and to assess the skills matrix of the board, in that we identified where we had reach skill and where we might have been larger in skill.

 

00:25:29:14 - 00:25:44:17

Jenni

And then you mapped that against your refresh strategy, for your board directors and identified the next skill sets that the board would be seeking, and then start to look at your recruitment strategy in relation to that.

 

00:25:44:20 - 00:26:27:18

Phil

It's it's fascinating. You talk about the future, skill set record. And again, out of this year's NFP study, we picked up around artificial intelligence in particular, where directors were feeling that they may not have had the appropriate skill sets required, both at a board level and also in the in their C-suite, to be seeking about how I could really benefit the organisation or just use AI as an example of that sort of future direction of, you know, getting the right people onto the board for the next iteration of the organisation.

  

00:26:27:20 - 00:26:55:24

Jenni

It is a really important comment, and we could continue to look at AI, as an example. That was in the last refresh, strategy when we had a vacancy. Technology was one of the areas that our board identified as an area that we needed on the at the board table, technologies moving faster than any of us could ever have imagined.

 

00:26:55:24 - 00:27:38:06

Jenni

And and because of that, we needed, that governance framework around it. So, I, I agree with you. It's thinking for the future. What do we need? Where is the organisation that where is the sector? Where is the sector going? What are the skills that we can say the sector will need in the future? When you think about aged care and you think about the volume or the demographic that we're dealing with and the increase in older people over the age of 85 and how we care for older people, we care for them in three ways in their home, in a village or in residential aged care.

 

00:27:38:08 - 00:27:56:01

Jenni

And so there's a bricks and mortar element to the work. So how do we know what's got the best expertise there? So it is constantly thinking about the sectorial implications and the organisation and then looking at the skill sets in the board.

 

00:27:56:03 - 00:28:15:22

Phil

And I know we've done a separate, addition of boards with purpose podcast, specifically looking at care governance. But I want to just to pick up a little bit here, on clinical and clinical skills of board members. Yeah, that's changed considerably. Yes.

 

00:28:15:23 - 00:28:16:18

Jenni

It has.

 

00:28:16:24 - 00:28:19:28

Phil

And how are you getting that right balance there.

 

00:28:19:29 - 00:28:49:19

Jenni

Yes. Okay. Such a great question. I'm deep in this at the moment. The legislation changed on 1st November to be a right space legislation framework. Then what does that mean and what does that look like? And how do you ensure that your governing rights based legislation. So we've been doing a lot of work to look at what is rights based legislation.

 

00:28:49:22 - 00:29:22:14

Jenni

How would we know if we were governing to a rights based level? And so we've been working with, with the university on looking at a co-design model on rights based, governance so that we ensure that that's embedded across our organisation. We have clinical experts on our board, and we have a clinical or a governance committee. I will say it's a K governance committee because clinical is a narrow form of care.

  

00:29:22:16 - 00:30:03:15

Jenni

And I think it's really important that we keep our minds on the care. And I'll go to something now. I'm really passionate about is care equal equals culture. And if you don't have a strong, robust culture, then you're risking quality of care. And so care and culture must be intertwined to ensure we we provide the best quality care possible, because we must have a shout out and shout up culture to highlight and identify where things aren't going, as well as what they could.

 

00:30:03:18 - 00:30:18:03

Jenni

And so that a Royal Commission's Iowan. So 428. But a number of Royal commissions have told us that. So care and culture intertwined, and they must always be in the non-executive directors minds.

 

00:30:18:03 - 00:30:36:11

Phil

I absolutely. And that links straight back to purpose. Yes. You've got to have the right culture linked to care to achieve that outcome. That's all quality lives for those most loved ones.

 

00:30:36:11 - 00:31:00:07

Jenni

Yes, absolutely. Whether it's a child or an older person, whether it's a person with a disability or a person with a mental health issue, anybody in our community that's identified as vulnerable, which is why we go back to diversity and inclusion. That diversity in your board is really important as well. And it's just not one form of diversity.

 

00:31:00:07 - 00:31:17:04

Jenni

It could be cultural diversity, it could be gender diversity, it could be age diversity, it could be ability diversity. Diversity and inclusion is a critical element to consider as well. When we're looking at governance,

 

00:31:17:06 - 00:31:40:01

Phil

One of the other nuts and bolts things that came out of the NFP study was around the time commitment for directors, and your had time commitments continue to increase. But I was kind of amazed. I think it was over 10% was spending more than eight days per month on a not for profit board. And I've had lots of conversations around this.

 

00:31:40:04 - 00:32:12:24

Phil

And it comes back to some, often some simple basics that if you're on the board of an organisation with multiple campuses, you're probably visiting those campuses once or so. You're spending time at the coalface, so to say, as well as board meetings as well as committee meetings. And again, that has reflected, I think, in this greater likelihood for remuneration.

 

00:32:12:27 - 00:32:20:25

Phil

What are the what are you saying for your directors or maybe for your chair in particular, in terms of how it's meant?

  

00:32:20:28 - 00:32:43:10

Jenni

A lot of hours they would never be awake. That goes past that. We don't see each other or speak to each other. I agree with you. I think the commitment of board directors has increased, and that's for some of those previous comments that we made. What is the voice of the resident and how do you hear that?

 

00:32:43:13 - 00:33:09:19

Jenni

What is the voice of the staff member and how do you hear that? How can you have comfort in the culture of the organisation? What do you know? How do you see it? Who do you talk to and how do you report that back? And in terms of our residents or customers, how do you see and experience them to know that you're stewarding a good organisation?

 

00:33:09:21 - 00:33:44:05

Jenni

So that could be visits. It could be going along to a consumer advisory body. It could be meeting up with staff at one of the campuses or homes or villages. There's a lot of ways to do that. And considering an intentional way is the most important thing I could suggest to directors is what is your intent and how do you give yourself comfort that you can hear the pulse of the organisation from the variety of stakeholders that a person?

 

00:33:44:07 - 00:34:10:11

Phil

I was chatting with the director last year who had taken on a role where organisations emerged, and suddenly the amount of time that they'd had to spend was enormous. And while our remunerated really did reflect on, well, the hourly rate is actually going to be a pittance because we're doing so much to get this merger over the line.

 

00:34:10:17 - 00:34:28:20

Phil

So, again, it's a fascinating one to be actually considering all the yes, you are remunerated, but is the level of remuneration sufficient to actually make you want to do the job? And I suspect people wouldn't do it for the remuneration is just something that is an additional benefit to them.

 

00:34:28:22 - 00:34:56:15

Jenni

I would agree with that too. It it isn't a large volume of dollar at all, but it is a recognition. So it is remuneration is a funny term. It is more or less like a stipend as well. It is not a big amount of money for the commitment. And what we're asking for an emotional commitment to the organisation, a psychological commitment to the organisation and a time commitment to the organisation.

 

00:34:56:18 - 00:35:19:18

Jenni

So it is a big commitment for for directors to say, yes, I'll be on that board and we expect them to do their due diligence as well. So is this a board you want to be on? Does this meet with your values? Are your values aligned? Will you be able to commit to in-person meetings? Will you be able to travel if required, so.

 

00:35:19:20 - 00:35:20:06

Phil

That.

  

00:35:20:09 - 00:35:24:02

Jenni

It takes a lot to be a director of a board?

 

00:35:24:04 - 00:35:33:13

Phil

Jenny, it's been lovely chatting with you today on this really important topic. Thanks so much for your insights and look forward to catching up with you again soon.

 

00:35:33:16 - 00:35:34:24

Jenni

Thank you. Phil, thank you.